COVID-19 will make significant changes to the American and global economy.
Hello, dear colleagues!
Well, I will start again with the sad topic of the pandemic. The COVID-19 epidemic has already killed about 36,000 people worldwide. This figure is quite significant and very disturbing, especially given that the peak of the epidemic has not yet passed.
In Spain and Italy, the cursed infection kills more than 800 people every day, and Britons are urged not to relax and be ready for the peak of a new type of coronavirus. In France, every third patient who is in intensive care is younger than 60 years old. The United States, as I mentioned the day before, is ahead of the entire planet not only in economic terms, but also in the growth of the number of infected COVID-19.
By the way, the forecasts for economic growth are disappointing. Thus, the World Bank predicts the impoverishment of millions of people due to falling economic growth in China, East Asia, and the Pacific region. According to the forecast, the growth of the Chinese economy will slow to 2.3%, and in developing countries, economic growth will fall to 2.1%.
The analytical department of S&P believes that the coronavirus epidemic will contribute to zero global growth. Before the outbreak of the pandemic, this authoritative agency predicted that global economic growth this year would be 3.3%. Unfortunately, now we will have to forget about such figures.
We need to prepare for the worst-case scenario, and in this regard, the data on the US labor market for the month of March, which will be published this Friday at 13:30 (London time), will be very interesting.
Judging by the mind-boggling number (3.28 million) of US citizens who applied for unemployment benefits, the American labor market is waiting for drastic changes. Naturally, not for the better. Let me remind you that the US labor market has been and still remains the main driver of the world's leading economy, but the consequences of COVID-19 will make significant changes.
Meanwhile, as it became known yesterday, the US Federal Reserve System (FRS) will launch a new repo program on April 6, whose task will be to provide access to dollar liquidity for the world's leading central banks. Thus, central banks will be able to sell or exchange US securities (treasuries) for overnight loans in US currency. It is assumed that this program will operate for 6 months.
Another news item worth noting is that, according to a very reputable world agency, US President Donald Trump may delay Chinese payments, presumably for steel and aluminum.
Now about the main currency pair of the Forex market. In relation to the US currency, many leading analysts of major commercial banks are positive and believe that the US dollar will soon resume growth, which will be very stable and long-lasting. I am not inclined to share such rosy prospects for the US currency. Judge for yourself, the consequences of the coronavirus epidemic in the first place will significantly worsen the situation in the world's leading economy, and the Fed's printing press, which will actually work in three shifts to ensure liquidity and maintain economic activity, will release a huge amount of unsecured dollars. This factor, together with the expected significant deterioration of the economic situation in the US and in the world, is unlikely to strengthen the US dollar, which, for a moment, is the main reserve currency of the world. However, in the context of the COVID-19 epidemic, different options are possible, because the consequences of the epidemic and its impact on the world economy are still unknown and cannot be estimated. Wait and see.
Daily
In yesterday's trading, the pair fell to the level of 1.0926, where it found strong support and leveled almost all losses. Tuesday's trading ended above the Ichimoku indicator cloud, just above the 89 exponential moving average. The closing price of yesterday's session was at 1.1032.
Judging by the long tail (shadow) of yesterday's candle, the market has made it clear that it does not want to decline. However, at the end of the article, the bears are again putting pressure on the quote, and the euro/dollar is trading near 1.0980. Perhaps market participants can't decide on the direction in anticipation of Friday's Nonfarm Payrolls.
In general, the technical picture for the euro/dollar remains vague and does not give a clear idea of the further direction of the pair. A bearish scenario will become very likely only if yesterday's lows are updated at 1.0926. If this happens, the quote will most likely fall to the area of 1.0887, where there is a strong technical zone due to the presence of the Tenkan line, the lower border of the Ichimoku cloud and the level of 1.0887 itself. From a technical point of view, purchases from here look reasonable. Regarding sales, those interested can try to open them from the current prices with goals in the area of 1.0890. If bullish patterns of Japanese candles appear near this level on the daily, four-hour or hourly charts, this will be the basis for closing sales and a signal to open long positions. That's all for now.
Good luck!
